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Subsidizing and price fixing us into the poorhouse

This article does a great job explaining how government through its burdensome regulations, tax laws, and cronyism does nothing but create massive market distortions that disrupt and drag down our economy.  The MYTH that the free market has failed is just that.  A MYTH.  We haven’t had a free market in a very long time because it has been pushed off the tracks by progressive Marxist/socialist policies.

This paragraph is a pretty good summary, but you are cheating yourself if you don’t read the whole thing.

Government is theft. It produces nothing and has nothing except that which it takes from the producers. It then turns around and grants what it has taken to favored constituencies in a massive reverse Robin Hood scheme. Subsidies are a subtle form of economic warfare between the haves (crony corporations) and have-nots (the people) and class warfare created between the people who are divided based on their economic status, minority status, etc. Price controls distort natural supply and demand, destroy profit margins, and create shortages. All is a masquerade for the benefit of a wicked political system.


Subsidizing and price fixing us into the poorhouse

corn subsidy concept“The whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.” — Henry Hazlitt, “Economics in One Lesson”

One of the greatest fallacies of recent generations is the argument that free market capitalism has failed and that said failure is responsible for America’s moribund economy, the ongoing destruction of the middle class and the growing level of income inequality in which the 1 percent get richer at everyone else’s expense.

The American system is much more fascist and oligarchic than capitalistic. Special incentives, tax breaks and subsidies are given to crony corporations and certain industries in order to buy votes and generate kickbacks for lawmakers. And central planners set prices and control production levels of foods and other commodities. These policies create malinvestment and shortages and cause increased costs for staples and other goods by acting as a sort of hidden tax. Much of this stems from the creation of the Federal Reserve — which is neither federal, nor holds reserves — and Great Depression-era legislation that was bad at the time but has since morphed into something much worse.

Government is theft. It produces nothing and has nothing except that which it takes from the producers. It then turns around and grants what it has taken to favored constituencies in a massive reverse Robin Hood scheme. Subsidies are a subtle form of economic warfare between the haves (crony corporations) and have-nots (the people) and class warfare created between the people who are divided based on their economic status, minority status, etc. Price controls distort natural supply and demand, destroy profit margins, and create shortages. All is a masquerade for the benefit of a wicked political system.

Of course, government printing press money distorts economic reality, dilutes morality and is the true source of “income inequality.” Printing press money is the root of all evil in society because it makes possible the vote-buying and other evil schemes of the elected class. An unlimited supply of paper money makes for unlimited evil government. Fiat paper money is tyranny or becomes tyranny. It guarantees criminal government. For a greater understanding of the Federal Reserve, go here.

In a real free market economy, the way for true economic growth is by the free and unfettered transfer of services, goods or wealth between people (or businesses) who actually produce something. In other words, if someone provides a service and gets gold or silver or something backed by gold and silver (actual wealth) or widgets for compensation, both the service provider and widget maker have benefited and each has something that has bettered his standard of living.

If the one who performed the service uses the widgets to acquire trinkets that help him perform his service, then the service performer has benefited. The trinket maker has also benefited, and he can put the widgets to use. This sort of transfer has worked from the beginning of time, when the farmer took his produce to market, where it was sold or bartered in exchange for wealth, tools, supplies and seeds so he could begin producing food for next year.

But the playing field must be level, rather than uneven, based on special favors granted to one group or another. This transfer system is greatly distorted when one or more companies get special favors in the form of bailouts, tax breaks, incentives or exemption from laws and regulations that other companies doing the same or similar business do not. It is further distorted when government sets production quotas and/or fixes prices.

The market is then no longer free but controlled. Consumers have fewer choices, and manufacturers have fewer incentives to provide more choices or better service than their competitors. Any possible competitors are placed at a disadvantage. Resources are diverted from more productive to less productive uses, which reduces economic efficiency. This is also how government interference creates monopolies. Monopolies cannot exist and never have without government intervention.

This creates a sort of double or triple taxation on the people, who see their wealth diluted first through money printing, then see it diluted further by higher taxes — which are diverted to certain corporations and industries — and artificially inflated prices for the goods and services.

The U.S. Department of Agriculture may be the biggest culprit when it comes to subsidies, price fixing and rationing; and its activities just drive up the cost of food while providing cushy and permanent incomes to farmers. Between 1995 and 2013, the USDA spent $295 billion on agricultural subsidies. So what are and how do they work?

Protectionism in the sugar industry began way back in 1789 when a tariff on imported sugar was imposed. Sugar now has the highest degree of government control of any major agricultural commodity. Sugar farmers are granted loans by the USDA that they can repay with raw sugar if the price falls below 20.9 cents per pound — which is essentially a mass purchase of sugar that drives up the price for consumers. The USDA then sells the surplus to ethanol producers at a discounted price, which costs the government another $250 million. There are also tariffs and quotas on imported sugar that limit the supply of cheaper sugar that could be imported. One study showed that if the sugar program were abolished, sugar prices would fall by one-third, saving U.S. consumers between $2.9 billion and $3.5 billion annually. The USDA spent $171.5 million on the sugar program in 2013. The program benefited the nation’s 20,000 sugar farmers with an average of $85,000 each from the government. What’s worse, U.S.-produced sugar is primarily high fructose corn syrup, which is nothing more than a cheap non-food that can be used as a filler to the detriment of our health.

From 1995 to 2013, the USDA spent $19.2 billion on subsidized corn- and soy-derived junk food ingredients. And it’s not just for junk food that corn growers are reaping a bountiful harvest of greenbacks, it’s also for ethanol. The ethanol mandate has caused millions of acres of grassland and wetlands to be converted into cornfields, and many more millions of acres of food corn — both for humans and livestock — to be converted into fields of corn for ethanol. Not only is ethanol a poor substitute for oil — it takes 1.5 gallons of ethanol to replace one gallon of gasoline and more energy is used to produce it than is saved — but subsidies for it have incentivized farmers to convert from growing food corn to ethanol corn, which has driven up the cost of food corn and created shortages, particularly in developing countries. Over the past 30 years, ethanol corn production has been subsidized by untold billions via tax breaks, import tariffs and infrastructure credits. Until 2011, the program received an average of $6 billion annually. Today, more than 40 percent of corn production is converted into vehicle fuel.

Other farm subsidies from the USDA include $689 million to apple growers, $27.8 billion to soy growers and $84.4 billion to food corn growers. Other subsidized crops include wheat, sorghum, barley, oats, cotton, rice, minor oilseeds and peanuts.

But that’s not all. Farmers participate in a New Deal-era marketing loan program that is simply a price-support program for their crops — mostly the same crops listed above. Under the program, farmers use their crops as collateral, which allows them to default on loans without penalty. If crop prices fell below levels established by government, farmers kept their loans and forfeited their crops to government, which stuck taxpayers with the loan debt.

Farmers also get to buy subsidized insurance that protects them against weather, pests and low market prices. Government pays up to two-thirds of the insurance premiums, then pays them pre-set market prices for their failed crops.

Farmers are also paid to not grow certain foods and to leave their land fallow. According to The Washington Post, between 2000 and 2006, the USDA handed out $1.3 billion in direct payments to people who didn’t farm. The paper noted thousands of acres of land in Texas that had been converted from rice fields to suburban housing and other uses even while the landowners continued to receive federal farm subsidies.

Government continues to set the price of milk because of “inequities in the milk market” discovered in the 1930s. The rules created to cure these “inequities” set minimum prices dairy processors must pay dairy farmers in 10 regions of the country. This has created price discrepancies in the various regions and prohibited low-price milk in one region from being sold in a region with higher prices. The Organization for Economic Cooperation and Development found that U.S. policies create a 26 percent “implicit tax” on milk consumers. That “milk tax” is regressive, meaning that it harms low-income families the most. The Government Accountability Office compared U.S. dairy prices to world prices over the period 1998 to 2004. It found that U.S. prices for butter averaged twice the world price, cheese prices were about 50 percent higher, and dry milk prices were 24 percent or more higher.

A similar program created in 1949 for raisins is now awaiting a decision by the U.S. Supreme Court. The Raisin Administrative Committee has a price stabilization program to prop up raisin prices. In 2002, that program decided that it would confiscate 47 percent of the raisin crop to divert into a reserve that was then distributed to big raisin producers like Sun Maid, who then sold it to the U.S. government for school lunch programs or shipped it overseas. But the raisin growers weren’t compensated for the taking. When that happened, Raisin Valley Farms owner Marvin Horne decided he’d had enough. He believed that if he packaged and sold his own raisins, he could circumvent the order. Other raisin producers, sensing an opportunity to benefit from all their labor rather than only that portion the eggheaded bureaucrats thought they should, decided to follow suit. The USDA promptly slapped the Hornes with fines and demanded payment for the raisins they didn’t surrender. Horne said the fines and payment totaled about $1 million — much more than he and his small farm could muster. So he sued. The Supreme Court heard the suit a second time this spring, and a decision is pending.

In 2011, when inflation drove up the cost of chicken and with consumers looking for alternatives to the hormone- and antibiotic-laden chickens found in grocery stores, demand for chicken dropped. But rather than let Big Chicken deal with the fact that it erred by raising production 4 percent as demand was decreasing, the USDA (read the American taxpayer) bailed out chicken producers to the tune of $40 million. CNNMoney reported: “The USDA steps in occasionally to buy up food products that are in surplus supply in the market. By doing this, it helps shrink the glut of the product, raise retail prices and support producers that are struggling to cover the cost of production.” (Emphasis added.) Note that the USDA considers producers of farm products more important than consumers who would benefit from the lower prices.

Of all the subsidy programs to farmers, most went to large agribusinesses rather than family farmers. Most farm subsidies are distributed to commercial farmers, who have an average income of $199,975 and an average net worth of just under $2 million.

But it’s certainly not just Big Agriculture reaping government windfalls. Big corporations are enjoying a bonanza. For instance:

  • Credible estimates of annual fossil fuel subsidies range from $10 billion to $52 billion annually; yet these don’t even include costs borne by taxpayers related to the climate, local environmental and health impacts of the fossil fuel industry. As of July 2014, Oil Change International estimates U.S. fossil fuel subsidies at $37.5 billion annually, including $21 billion in production and exploration subsidies.
  • Fortune 500 firms alone receive more than 16,000 subsidies at a total cost of $63 billion. Additionally, eight out of the top 20 firms receiving U.S. taxpayer subsidies are not even U.S. companies, meaning American taxpayers are being forced to directly subsidize foreign firms. These corporations and their subsidies received include Intel ($3.8 billion), IBM (more than $1 billion), Google ($632 million), Dell owner Silver Lake Partners ($482 million), Yahoo ($260 million), Microsoft ($95 million) and Koch Industries ($88 million).
  • And then there are these: Boeing ($13.2 billion), General Motors ($3.5 billion), Royal Dutch Shell ($2 billion), Dow Chemical ($1.4 billion), Goldman Sachs ($662 million), Walt Disney ($381.5 million), Walmart ($150 million), Abercrombie and Fitch ($23 million), and Bed Bath & Beyond ($10 million).

Clearly it’s not free market capitalism that has failed, but it’s crony capitalism/fascism that has failed.



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